The Infosys board will consider an at least Rs10,000 crore share buyback proposal, a first in its 36-year history and longstanding demand of Infosys founders

The news of the share buyback proposal propelled Infosys shares 4.54% on Thursday to close at Rs1,021.15 apiece. Photo: Hemant Mishra/Mint

Bengaluru: Infosys Ltd shares surged 4.5% on Thursday after India’s second largest software services exporter said its board will consider a share buyback on 19 August—the first stock repurchase in its 36-year history.

Infosys’s board will meet on Saturday to take up the proposal, the company said in a filing to stock exchanges on Wednesday. Shares rose to close at Rs1,021.15 apiece on BSE on a day the exchange’s benchmark Sensex edged up 0.08% to 31,795.46 points.

Although Infosys has not disclosed the details of its buyback, including the size of the repurchase and the price at which it will buy shares, two executives familiar with the development said the size will be at least Rs10,000 crore.

“The board of directors will consider a proposal for buyback of equity shares of the company at its meeting to be held on August 19, 2017,” Infosys said in a statement.

On 15 April, while declaring its earnings for the fourth quarter, Infosys disclosed that it had decided to pay out Rs13,000 crore to shareholders through dividends and/or a share buyback. Infosys also said that the company would use 70% of its free cash flows (as against 63% earlier) to award dividends or buy back shares, starting this year. Since Infosys is listed both in the US and India, over the past few months the company has claimed that multiple approvals from different stock exchanges had led to a delay in announcing the share buyback.

Over the past few years, home-grown IT firms such as Wipro Ltd and its larger rivals Tata Consultancy Services Ltd (TCS) and Infosys have struggled for growth. For the first time since 2009-10, TCS, Infosys and Wipro—which put together make up a quarter of the IT services industry’s total business—grew at a slower pace than the industry’s 8.6% growth in constant currency terms in 2016-17.

As a result, shares of these firms lagged the broader index: in 2016, TCS fell 3.2%, Infosys 8.5% and Wipro 15.33%, while the Sensex rose 2%.

To boost investors’ faith, IT firms have turned to share buybacks. Earlier this year, Mumbai-based TCS completed a Rs16,000 crore buyback, while Wipro expects to complete its proposed Rs11,000 crore buyback by early November.